Monday, January 22, 2007

State Street buys Currenex

Well my acquisitive radar has been picking up on lots of signals recently about potential acquisitions by banks. The latest announcement that State Street is buying independent online FX provider Currenex for $564 million probably comes as no surprise in light of the spate of consolidation the market witnessed last year with some of FXall's shareholder banks selling their interest to a private equity firm, Knight Capital buying Hotspot FX and Icap buying interbank FX provider EBS.

In an interview with financial-i magazine back in December, Simon Wilson-Taylor, worldwide head, State Street Global Link, which incorporates its online institutional dealing platform FX Connect, alluded to its desire to enter the active trading marketplace in FX, which the Currenex acquisition will provide them with.

In that interview, Wilson-Taylor said State Street Global Link would institute an active trading environment for FX in Q2 or Q3 this year, and now it seems the Currenex acquisition will form a key part of that. Currenex was also an early proponent of executable streaming prices in online trading, another capability State Street is looking to add.

The Currenex acquisition will allow State Street to diversify its platform beyond the institutional investor space which it has dominated to include active currency managers and hedge funds, meaning that is now has a lot more bases covered than before. But what will this mean for FXall, which is now the only multibank platform apart from FXConnect/Currenex left standing.

Remember, some of the banks that invested in FXall could no longer see the value in participating in a multibank platform whilst maintaining their own single bank sites and chose to sell their stake to Technology Crossover Ventures, which bought a minority stake in the bank-owned foreign exchange trading portal last July. Will the Currenex/State Street combination cause other shareholder member banks of FXall to explore their options?

FXall appears to be hedging its bets going after the corporate, active trader, asset manager and broker/dealer community. In January this year it announced that trading on its platform in 2006 exceeded $9.8 trillion, an increase of 45% on 2005's levels, with average daily volumes reaching $47 billion in December.

According to FXall most of the growth in trading activity on its platform came from investment managers, which it says account for almost 50% of volumes. Active traders and hedge funds have also increased their activity on FXall, with volumes 79% higher in Q4 last year than the previous year. Trading by asset managers, FXall says also increased by more than 70%.

State Street's FX Connect daily trading volumes are more impressive though, exceeding $108 billion in a single day’s trading back in December, and with Currenex's trade flows added to that, it will be a strong contender in the online FX space, not only for institutional investors but now also in the active trading space.

Stay tuned as I hope to be speaking with Simon Wilson-Taylor of State Street later this afternoon to get his comments on the deal.


ilanit said...

we can take ourselves private again later. Only way to get proprietary dealflow.We urgently need a public market currency. To

short sell our Los Angeles private equity.It is our master plan.

Take everyone else private while we go public and the passive index trackers will only be able to buy us.Permanent capital -
10 year lockups just don't cut it anymore.Future fee monetization,getting out while we can...anything else plausible

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